<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Global Investment House – Saudi Arabic Economic & Strategic Outlook – Power Sector In GCC, Saudi Arabia accounts for about 48% of the total power generating capacity in the region. In terms of per capita installed capacity Saudi Arabia has per capital power generation capacity of 1,313 Watt of power capacity as against GCC region’s per capita average of 1,835 Watt. In Saudi Arabia, the formation of Saudi Electricity Company opened the door to private sector construction of new power plants on BOO (Build-Own-Operate) and BOT (Build-Own-Transfer) bases. In June 2005, the country’s first IPP which came online was SADAF’s (Saudi Petrochemical Company) co-generation power plant with a capacity of 250 MW. It was the first captive Independent Power Producer (IPP) Cogeneration plant in the Middle East.

In Saudi Arabia, over 2000-2005, power generating capacity increased at a CAGR of 4.6% from 25,790 MW in 2000 to 32,301 MW in 2005. The year 2005 witnessed capacity addition of 1,775 MW or a growth of 5.8% over 30,526 MW reported in 2004. Out of the total capacity addition 1,775 MW during 2005, SEC added 1,340 MW, Saline Water Conversion Corp. (SWCC) added 94 MW and other producers added 341 MW. SEC accounted for almost 90% of the country’s total power generation capacity while SWCC and other large producers accounted for 8% and 2% respectively in 2005.

Increased demand for power…

Over the last few years Saudi Arabia has witnessed rapid growth in power generation which grew at a CAGR of 6.9% during 2000-2005. As against this the growth in capacity addition was at 4.6%, which reflects the efficiency at which the available capacity have been utilized. Industry’s overall generation increased from 14,405 MW in 2000 to 20,105 mw in 2005. In case of SEC output grew at a CAGR of 7.7% from 11,820 MW in 2000 to 17,148 MW in 2005.Despite the growth in installed capacity the peak load on the system remained in high terrain which increased from 84% recorded in August 2000 to 92.6% in August 2005, which shows growing demand for power in the country. In volume terms, peak load power requirements went up from 21,673 MW in 2000 to 29,913 MW in 2005.

Planned Projects in Power Sector…

Among the upcoming projects, Saudi Electricity Company is developing several new power plants at a total investment outlay of SR46.5bn (US$12.4bn), which will add a total of about 19,175 MW of power generation capacity during the period 2006–2017. The company will also invest SR8.0bn (US$2.1bn), over 2006-2017, in transmission projects which will have length of 3,860 km.

Planned Investment Projects of SEC

Projects

2006-2017

Capacity

Investment Outlay

Power (MW)

19,175

SR46.5bn

Transmission Line Project (KM)

3,860

SR8.0bn

Source: SEC

The other planned power projects are under separate IWPPs and IPPs. Apart from these, Marafiq (Power and Water Utility Company for Jubail and Yanbu) is also developing power and water projects in the industrial city of Jubail. These projects are as enumerated below:

I. Independent Water & Power Projects (IWPPs)

To develop IWPPs, Water & Electricity Company (WEC) was established by the Supreme Economic Council to promote private investments in the IWPPs. WEC, a limited liability company, owned on a 50:50 basis by SEC and Saline Water Conversion Corporation (SWCC), will be the single off-taker of the generated power & water by the IWPPs that will be implemented on a Build Own & Operate (BOO) basis with a concession of 20 years.

As per the original plan there were four IWPPs which had been planned. Now, as per the recent media reports, WEC has cancelled the Al-Jubail project (1,100 MW of power and 340,000 cubic meters per day of water) which was expected to be the fourth in WEC’s IWPP series. The size of Ras Al-Zour project has been increased to 3,000 MW of power and 1,000,000 cubic meters of water per day from the earlier envisaged 2,500 MW of power and 800,000 cubic meters per day of water.

The initial stage of the IWPP will entail the following 3 projects:

IWPP Projects

Project

Power (MW)

Water

(Cubic meters per day)

Schedule of Implementation

Capital Outlay

(US$ mn)

Shoaiba (Phase 3)

900

880,000

Q1-2009

2,460

Shuqaiq (Phase 2)

850

212,000

Q2-2010

1,250

Ras Al-Zour

3,000

1,000,000

Q2-2011

3,750

Source: WEC Website

The transmission & distribution of power & water produced by the 4 IWPPs will require additional investments of US$3.2bn.

II. Other Independent Power Projects (IPPs)

Saudi Aramco, SABIC and SADAF forming the major group of driving forces in power generation enterprises for their captive plants usage;

In late 2003, Saudi Aramco launched 4 new IPPs at Ras Tanura 150 MW; Juaymah 300 MW; Uthmaniyah 300 MW; and Shedgum 300 MW with a combined capital investment exceeding SR2bn. These projects have been established in cooperation with private sector (consortium of Saudi Oger & International Power) on a BOOT basis (with a concession period of 20 years).

Ma’aden (Saudi Arabian Mining Company) is planning an independent power generation plant at Ras Al-Zour which will have capacity of 1,800 MW to meet demand for its Integrated Aluminum Complex.

III. Marafiq Power & Water Projects

Marafiq(Power and Water Utility Company for Jubail and Yanbu) was established by Saudi Basic Industries Corporation (SABIC), Saudi Aramco, Royal Commission for Jubail & Yanbu and the Public Investment Fund to offer electricity and water to the twin cities of Jubail and Yanbu. Marafiq currently owns and manages the 1,060 MW power plant, located in Yanbu industrial city, and various water treatment plants such as cooling water, drinking water, sanitary waste water, and industrial waste water facilities.

Marafiq is planning an IWPP in the industrial city of Jubail with an estimated cost of SR9.4bn (US$2.5bn). However, the project cost is expected to rise in line with the change in scope of the Request for Proposals (RFPs). It will be implemented in two phases. The first phase will have capacity of 2,500 MW of power and 800,000 cubic meters of desalinated water per day, which will be implemented by 2009. This is as per the revised RFP as compared to originally planned 2,400 MW of power and 300,000 cubic meters of water per day. Phase II will have capacity of about 1,500-2,000 MW of power and 100,000 cubic meters of water per day and an announcement is yet to be made on its timing.

Demand for power in Saudi Arabia is growing at the rate of 6% per annum. The peak demand had growth of about 7% a year, which is likely to be in double digits over the next few years, mainly because of massive investments are being planned in mega energy, industrial and real estate projects as discussed above. Expanding populations and social developments are other major drivers for demand at this high rate. Apart from these domestic demand drivers, the upcoming GCC power gridwill also add to the demand growth and Saudi willhave a major role to play as it has the largest capacity in the region. To fulfill the likely growth in demand, several IPPs are coming up apart from the new projects under SEC. As per SAGIA overall power capacity in Saudi Arabia is forecasted to grow to 59,000 MW by the year 2024 requiring an estimated investment of SR430bn (US$115bn). To achieve this target the ministry will present several joint projects to the private sector, local and foreign, in order to increase power generation capacity. With electricity demand expected to more than double over the next 20 years, an encouraging number of investors have shown interest in establishing new power generation companies, in the country. The regulatory authority (ESRA) will license newly-formed companies while the Saudi Electricity Company (SEC) will handle electricity distribution

At the moment, the total number of electricity subscribers exceeds 4.7mn in Saudi Arabia, where more than 10,160 cities, towns and villages have been electrified. It has been predicted by 2008 the power supply will cover all settlements and villages not previously supplied with electricity, raising the number of electrified cities and villages to 11,112. The company also has targeted to increase its customer base to 5.7mn by 2009. Thus, the sector has tremendous growth potential in the booming economy which will witness growing demand not only from the home turf but also from the region with the upcoming GCC power grid.